Correlation Between Genpact and Premium Catering

Can any of the company-specific risk be diversified away by investing in both Genpact and Premium Catering at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Genpact and Premium Catering into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Genpact Limited and Premium Catering Limited, you can compare the effects of market volatilities on Genpact and Premium Catering and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Genpact with a short position of Premium Catering. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genpact and Premium Catering.

Diversification Opportunities for Genpact and Premium Catering

-0.47

Correlation Coefficient

Genpact  Premium Catering

Very good diversification

The 3 months correlation between Genpact and Premium is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Genpact Limited and Premium Catering Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Catering and Genpact is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Genpact Limited are associated (or correlated) with Premium Catering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Catering has no effect on the direction of Genpact i.e., Genpact and Premium Catering go up and down completely randomly.

Pair Corralation between Genpact and Premium Catering

Taking into account the 90-day investment horizon Genpact Limited is expected to generate 0.13 times more return on investment than Premium Catering. However, Genpact Limited is 7.98 times less risky than Premium Catering. It trades about 0.01 of its potential returns per unit of risk. Premium Catering Limited is currently generating about -0.11 per unit of risk. If you would invest  4,441  in Genpact Limited on September 18, 2024 and sell it today you would lose (114.00) from holding Genpact Limited or give up 2.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	11.9%
Values	Daily Returns

Genpact Limited  vs.  Premium Catering Limited

Genpact Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genpact Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, Genpact reported solid returns over the last few months and may actually be approaching a breakup point.

Premium Catering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Catering Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Genpact and Premium Catering

The main advantage of trading using opposite Genpact and Premium Catering positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genpact position performs unexpectedly, Premium Catering can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Premium Catering will offset losses from the drop in Premium Catering's long position.

The idea behind Genpact Limited and Premium Catering Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.